Ditch debit fees for credit card rewards

By Curtis Arnold

Published October 07, 2011

CardRatings.com

Bank of America, Wells Fargo, Chase, SunTrust and Regions Bank have all announced plans to charge a monthly fee to use a debit card, running between $3 and $5 per month. And debit rewards programs look like they're next on the chopping block. JP Morgan Chase, Wells Fargo, SunTrust and Comerica have ended their debit rewards programs. Are there still benefits to using debit?

Many conscientious consumers switched to debit cards during the past few years in order to manage their debt. In 2009, Visa announced that spending on its debit cards had surpassed credit card spending for the first time in 2008. Debit payments were $206 billion versus $203 billion on credit cards. In 2010, American consumers made 37 billion debit card purchases compared with 19 billion credit card swipes, according to the Nilson Report.

But with new fees to use your debit card and the phasing out of rewards, now may be the time to rethink that debit or credit choice. And the card issuers are ready with beefed-up rewards programs. Current offers have holiday shopping and entertaining in mind, but the cash-back rewards can be attractive all year round. Here are some rich alternatives to the debit cards that may now cost you money. None of these cards has an annual fee.

The Chase Freedom Visa will pay you $200 after you make $500 worth of purchases in your first three months. From Oct. 1 to Dec. 31, you'll also get 5 percent cash back when you spend up to $1,500 on dining, department stores, movies and charitable donations - a good perk at this time of the year.

Sharing a meal with friends over the holidays or grabbing a bite on the run during your shopping will be rewarding with the Discover Open Road card. You'll earn a $150 gift certificate to Restaurant.com with your first purchase. You will also earn a 2 percent cash-back bonus at any restaurant or gas station on the first $250 you spend each month.

This Citi card also offers $200 cash after $500 in purchases during the first three months. The bonus categories - 5 percent cash back from Oct. 1 through Dec. 31 - include purchases at department and clothing stores, and for electronics and toys.

This Capital one card offers $100 cash-back bonus after you spend $500 in the first three months, and a 50 percent bonus on the cash back you earn every year. For example, if you earn $1,000 cash back during a year, you'll get an additional $500 bonus. Capital One Cash also offers a zero percent APR on balance transfers until September 2012.

Already planning that winter vacation? The Capital One VentureOne Rewards Card can help get you there faster. New accounts earn 10,000 bonus miles after you've spent $1,000 in the first three months, and 1.25 miles per dollar on every purchase. You can fly free on any airline without any blackout dates. And if you've got your sights set on a foreign holiday, the Capital One card has no foreign transaction fees.

Before you apply for a credit card, be sure you read the fine print to be sure the places you shop most frequently are covered by the program. For example, if you make most of your purchases in warehouse stores, you won't be earning points or cash back with most cards…unless you opt for the TrueEarnings Card from Costco and American Express (whose annual fee is covered by your Costco membership).

But if you manage your credit wisely, pay off balances routinely and match your shopping habits with your card offers, you may benefit from the many rewards programs credit cards offer to attract and keep your business.

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